This increases the risk of customers receiving non-compliant advice, and the institutions’ inadequate auditing of advice has failed to pick this up.

“The audit process failed to properly assess whether the adviser had demonstrated compliance with the best-interests duty and other related obligations,” the review says. “Affected customers were not always identified or properly remediated where necessary, and advisers providing non-compliant advice remained undetected.”

ASIC is also critical of the big four banks and AMP – the review’s subjects – for failing to inform it of breaches that put customers at risk.

“Our concern is many of the institutions we reviewed did not ensure their internal processes consistently supported the value of ‘doing what is right’ for the customer. Many of the failings we identified led, or had the potential to lead, to poor outcomes for customers.”

ASIC says the institutions are now examining corporate culture, and technology may help overcome some of their deficiencies.

It says they are tackling reference-checking, but more improvement is needed.

“We recognise there is no single measure or action that will raise standards and improve culture across the financial advice industry.

“We encourage the institutions to consider how improvements in areas such as remuneration structures, professional standards, reference-checking and record-keeping can be used in practical ways to improve and strengthen a customer-focused culture.”

ASIC Deputy Chairman Peter Kell says the review shows more work is needed to build consumer confidence, including more compliance action on advisers.

“'Failure or delay in notifying ASIC of suspected serious non-compliant conduct significantly affects our ability to take appropriate enforcement or other regulatory action,” he said.

“It might also result in an increased risk of customer detriment, as so-called ‘bad apple’ advisers continue to work in the industry.

“Strengthening breach-reporting requirements will be an important issue in the current review of ASIC’s enforcement powers, announced by Federal Government in October last year.”